KUWAIT CITY, May 17: March’s credit recorded its strongest gain since the crisis on the back of an improving non-financial business sector, with real estate leading the way. Despite the family fund settlements, household credit came in stronger than expected as well. Meanwhile, a sizeable increase in private deposits, notably in sight and time deposits, saw money supply expand healthily.
Credit saw its strongest month in over six years during March, with growth accelerating to 8.0% (y/y) following four consecutive month of weaker credit gains.
The monthly gain was KD 469 million, nearly three times the 12-month average. Most of the strength came from the non-financial business sector. Household credit was also stronger than expected given the write-off of Family Fund loans
Household debt (personal facilities ex-securities) was up KD 64 million, with y/y growth easing to 14.8%. The gain was below the recent 12-month average largely due to the settlement and write-off of Family Fund loans. If the effect of the latter is taken into account, growth in March appears to have been somewhat stronger.
Non-bank financials continued to deleverage during the month seeing a larger drop than usual. Credit to the sector was down by KD 83 million in March with the y/y decline reaching 18.4%.
All remaining credit gained KD 487 million, with growth reaching 7.9% y/y, its most rapid since August 2009. Real estate credit (+KD 193 mn) and loans for the purchase of securities (+KD 172 mn), both of which saw record gains, were the main sources of strength. Trade and industry also saw healthy gains as did the “other” sector. Construction was the only sector to see a notable decline.
Money supply (M2) growth accelerated to 8.8% y/y with private deposits up KD 1 billion, supported by a large increase in the net foreign assets of the central bank of KD 645 million and the strong growth in credit. The gain was the largest in three years and was visible largely in KD sight and time deposits, which increased by KD 426 mn and KD 492 mn, respectively. M1 growth accelerated to 19.7% consequently.
Deposit rates on dinar time deposits increased across the board by 3 to 5 bps. Rates on the 1-month, 3 months, 6 months, and 12-months timed deposits stood at 0.59%, 0.78%, 0.97%, and 1.17%. Meanwhile, interbank rates continued to edge higher averaging 1% in March.